On-cell touch panels were once expected to be the solution with the best development potentials in China's entry-level to mid-range smartphone sector, but so far, the number of mobile devices using on-cell touch and their shipments have been far below the original expectations.

Digitimes Research identifies two major issues with on-cell touch panels. User experience with its single-layer multi-touch technology is unsatisfactory. Difficulties in putting dual-layer ITO sensors on the back of the color filter extend the time needed to complete a project.

ITO film prices have recently dropped, helping reduce the overall production costs of dual ITO film-based GFF touch panels. This has prompted China smartphone vendors to turn to the technology their products, causing the TFT LCD-based on-cell segment to see a slower-than-expected development.

By integrating a display with a touch panel, on-cell technology has simplified related supply chain players' production, helping lower the costs as well as reduce handsets' weight and thickness. However, since the electromagnetic wave of the TFT LCD is prone to interfere with transmission, on-cell touch is usually adopted in mid-range or entry-level mobile devices which have lower display pixel densities.

Taiwan-based Chunghwa Picture Tubes (CPT) started mass producing on-cell touch panels in September 2013 and is supplying them to China-based CoolPad, while Taiwan-based Innolux and China-based Tianma have also recently started their mass production of such touch panels. Taiwan-based HannStar and China-based BOE have yet to start mass production for on-cell touch panels, and have just sent samples to its clients.

However, makers that have already started mass production are only shipping 100,000-200,000 on-cell touch panels per month and have yet to see the staggering growth they had expected. Digitimes Research believes that the slow growth is a result of several vendors such as ZTE delaying their projects using on-cell touch panels. Some touch module makers have canceled their orders for on-cell touch panel makers and adopted GFF touch instead.

On-cell touch technology still has several basic issues. The weak sensitivity of its original single-layer multi-touch technology. CPT has conquered it by using the dual-layer sensor technology, but the yield rate for this process is low, resulting in supply constraints.

LCD panel's electromagnetic wave interference issue can be resolved by adopting the full lamination process; however, adopting such a process has greatly raised the touch module's overall costs, making on-cell touch panels less competitive in terms of pricing. Currently, the quote for an on-cell touch panel is US$7 higher than a same-size standard TFT LCD panel, which is slightly more expensive than other solutions.

ITO film's recent average selling price (ASP) has dropped from CNY300 to around CNY200 per square meter and the fact that players other than Japan-based Nitto Denko are offering their ITO films at only CNY180, have greatly reduced overall production costs of GFF touch panels, which is restraining on-cell touch panels' shipment growth.

For on-cell touch technology to become popular, in addition to improving on-cell touch panels' yield rates and overall production capacity, panel makers will also need to find ways to eliminate electromagnetic wave interference without using full lamination. Developments of controller ICs should also focus on how to deal with air layers. Such improvements will be vital to on-cell touch technology's stable development.

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